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Manufacturer Based Channel Formats

The following are the manufacturer-based channel formats:

1. Manufacturers Direct
2. License
3. Consignment-Locker Stock
4. Broker
5. Franchise
6. Departmental Store
7. Mass Merchandiser
8. Specialty Store
9. Convenience Store
10. Hypermarket

Manufacturers Direct

Products are shipped and serviced from the manufacturer’s warehouse. They are sold by the salesforce or agents of a company. Many manufacturers-direct companies also sell through wholesaler-distributors.

License

This implies contracting distribution and marketing functions through licensing agreements, usually granting exclusivity for some period of time.

Consignment-Locker Stock

In this format, the manufacturer ships products to the points of consumption; but the title does not pass until the product is consumed. The risk of obsolescence and ownership is the manufacturers’ until used. This arrangement is usually associated with high-period-high-margin items and emergency items, such as diamonds and fragrances.

Broker

The manufacturers employ a specialized salesforce on a contract basis which carries out other comparable product lines and focuses on a narrow customer segment. Brokers are usually hired by small manufacturers trying a broad coverage. For example, frozen foods, paper goods, lumber, and so on.

Franchise

Here, product and merchandising concepts are packaged and formatted. Territory rights are sold to franchisees. Various distributions and other services are provided by contract to the franchisees for a fee.

Departmental Store

This type of store offers a wide variety of merchandise with a moderate depth of selection. The typical product mix includes both soft goods (e.g., clothing, food, and linen) and hard goods (e.g., appliances, hardware, and sporting equipment).

Mass Merchandiser

This is similar to a departmental store, except that product selection is broader and prices are usually lower.

Specialty Store

Offers merchandise of one line (e.g., women’s apparel, electronic) with great depth of selection at prices comparable to those of departmental stores.

Convenience Store

A small, higher-margin grocery store that offers a limited selection of staple groceries, non-foods, and other convenience items (e.g., ready-to-heat and ready-to-eat foods).

Hypermarket

A very large food and general merchandise store with at least 100,000 square feet of space. These stores typically devote as much as 75 percent of the selling area to general merchandise.

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